This weblog is usually more focused on property/casualty insurance issues, but everybody knows that health insurance is where much of the political action is.
Only ten days ago, Stephen Rosenberg's Boston ERISA Law Blog looked westward to examine recent bipartisan moves in Sacramento to address health care insurance availability and affordability through "fair share" legislation. Under a "fair share" plan (to oversimplify a bit) employers are required either to provide health insurance to their workers or else make a monetary contribution to the state's coffers.
As Stephen points out, there is One Small Problem with this approach. . . . Congress will not permit it.
When Congress passed ERISA [the Employee Retirement Income Security Act] way back in 1974, the federal government completely occupied the field of regulating employment benefits. Enacted in response to the perceived pension crisis of the early 70's, ERISA governs not just pension and retirement plans but also nearly every other sort of plan that may be characterized as an "employment benefit," including employer-provided health insurance plans. Congress was so intent on taking control of this area that state and local governments are expressly prohibited from enacting any regulation of their own concerning employee benefits. ERISA is the only game in town. The federal preemption is so broad that even state courts are barred from recognizing or enforcing common law remedies where employee benefits are concerned. This last attribute drives the plaintiffs' bar crazy, because it precludes "bad faith" claims against HMOs and health insurers if the policy was provided through an employer.
It would be difficult to imagine a more plainly ERISA-precluded policy than a state level mandate compelling employers to provide health coverage. Even ERISA itself does not mandate that an employer must offer any particular benefits, or any benefits at all, to employees. ERISA simply regulates the operation of benefit plans if an employer chooses to provide them. Congress has not mandated employer-provided health benefits (yet), but ERISA ensures that Congress is the only body that possesses that authority.
Stephen Rosenberg sums up the problem this poses for state and local governments who feel the urge to "do something" involving employers and health insurance:
California, like other state and local governments who tread this path, are likely walking right smack into the buzz saw of ERISA preemption, and much like the legislature of Maryland did in enacting its fair share act that was struck down by the courts, appear to be simply sticking their heads in the sand when it comes to this issue.
He's right, and early proof has surfaced this week. Not ones to wait for Sacramento to move, the progressive burghers of the City of San Francisco have already enacted a local "fair share" employer mandate. Yesterday, U.S. District Judge Jeffrey White on Wednesday ruled that the City had no power to do that.
The Sacramento Bee's Daniel Weintraub echoes Stephen in a post on his California Insider weblog [registration required], and offers suggestions as to why the merry band in Sacramento is blithely ignoring the obstacles posed by ERISA:
It shouldn't come as much of a surprise that Federal District Court Judge Jeffrey White has ruled that San Francisco's new health care benefits law violates federal law because it requires employers to spend a certain amount on health care for their workers or else pay a fee for the city. The bigger mystery is why state officials -- especially Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nunez -- have been pursuing an almost identical strategy, knowing it would probably eventually suffer the same fate. One answer is that they hope the Congress and the next president will repeal the law that preempts state and local programs, or at least give California permission to experiment with a federal mandate.
Not, in my view, a terribly likely outcome, no matter who is in charge of Congress and the White House at the end of next year. There are simply too many engrained habits in D.C. to make it all that likely that Congress will relinquish control of employee benefits at this late stage.
Weintraub, in turn, links a San Francisco Chronicle report that includes its own fascinating bit of policymaker rationalization:
City lawyers, joined by a group of labor unions, argued that the city was not regulating employee benefits - which federal law forbids - but was simply making health care available to workers whose employers chose not to provide it. They said federal law allows a local government to require employers to share in health care costs as long as companies can comply without setting up new health plans.
That sort of thinking is reminiscent of the old U.S. Supreme Court decision that reasoned that a denial of benefits for pregnancy did not discriminate between men and women, but rather between "pregnant and non-pregnant persons." Which makes it OK, right?
Interestingly, neither of these reports mentions ERISA by name, even though it has loomed large over employee benefit issues for more than three decades. Daniel Weintraub's post does not dig into the Court's rationale, and the Chronicle only refers vaguely to "a 1974 federal law that prohibits state and local governments from regulating employees' benefits" -- which is rather like describing the Internal Revenue Code as "a federal law that requires most adult citizens to fill out a form each year."
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UPDATE [122807]: Follow-up comments by Stephen Rosenberg on the San Francisco decision are here. He also points to a good summary post on the Workplace Prof Blog.
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